Banking shares are passing a sluggish time due to a fall in the operating profits of listed banks, analysts said.
The market gained 26 percent between April 30 and July 7, while the banking sector gained only 4.7 percent, according to Dhaka Stock Exchange.
The banks with good dividend yields and profits always dominate prices in the bank sector.
For example, Dutch-Bangla Bank’s share price closed at Tk 98 in August last year. It rose to Tk 123 in February only to come down to Tk 106 on July 9.
But many banks are generating negative returns in terms of price. Of the 30 private banks, 14 marked a decline in operating profit and the rest witnessed a slight rise in the first six months of this year, according to Bangladesh Bank.
The sector’s weak performance was caused by poor loan and trade growth, higher provisioning on non-performing loans and a falling interest rate spread, said Mohammed Rahmat Pasha, managing director of BRAC-EPL, a leading stockbrokerage.
Political uncertainty has also affected many businesses, which might have impacted the loan portfolio of many banks, certainly in terms of collection, Pasha added.
Loans and advances, the core operating asset of banks, have been experiencing a fall since the beginning of 2013, Pasha said.
Despite BB’s target of 18.5 percent private sector credit growth by June, it fell to a ten-year low of 11.4 percent on May 13, defying all the positive incentives taken by the central bank in its latest monetary policy statement, he said.
Low import growth has resulted in lower commission income from banks, he added.
Imports in July-April fell by 5.63 percent from the same time last year.
The interest rate spread is falling; it dropped below 5 percent in May, he said.
“The fall in profits of listed banks is the main reason behind this sluggish movement,” said Yawer Sayeed, managing director of AIMS of Bangladesh, an asset management company
Source: The Daily Star
